The central bank of the Indian Ocean island of Mauritius left its key interest rate steady, saying the economy started showing better resilience in the third quarter of last year and the bank's staff had revised upward its forecast for growth this year to 7.9 percent from September's forecast of 7.5 percent.
The Bank of Mauritius (BOM) kept its repo rate at 1.85 percent, unchanged since April last year when it was cut for the second time in 2020 in response to the hit to economic activity from COVID-19 after an initial cut in March.
Last year BOM cut its benchmark rate by a total of 150 basis points and at its last meeting in September, the monetary policy committee lowered its forecast for gross domestic product in 2020 to contract by 13 percent due to weaker demand for its exports.
Last year BOM cut its benchmark rate by a total of 150 basis points and at its last meeting in September, the monetary policy committee lowered its forecast for gross domestic product in 2020 to contract by 13 percent due to weaker demand for its exports.
In the third quarter of 2020 Mauritius' economy shrank 12.5 percent year-on-year, up from a 32.5 percent plunge in the second quarter and a 2.0 percent contraction in the first quarter.
In September the bank raised its forecast for economic growth in 2021 to 7.5 percent from an earlier forecast of 7.0 percent, and forecast inflation of around 2.5 percent in both 2020 and 2021.
Inflation in Mauritius eased to 2.7 percent in December from 3.1 percent in November and BOM said inflation will continue to be subject to supply-side pressures.
But in the absence of further external shocks, it forecast headline inflation of around 3.0 percent in 2021.
The policy committee generally meets once a quarter but the November policy meeting was cancelled so today's meeting is the first since Sept. 23, i.e. 4-1/2 months.
The policy committee generally meets once a quarter but the November policy meeting was cancelled so today's meeting is the first since Sept. 23, i.e. 4-1/2 months.
The Bank of Mauritius issued the following statement:
"The Monetary Policy Committee (MPC) of the Bank of Mauritius (Bank) today unanimously decided to keep the Key Repo Rate (KRR) unchanged at 1.85 per cent per annum.
There are signs of slight recovery in global economic activity since 2020Q3.The International Monetary Fund has, in its January 2021 World Economic Outlook Update, revised upwards global growth projections and is forecasting global output to grow by 5.5 per cent in 2021 and by 4.2 per cent in 2022. However, global economic recovery would remain dependent on the effectiveness of the vaccination campaigns to curtail the course of the COVID-19 virus. Global inflationary pressures are projected to remain contained in the near term.
The domestic economy started showing better resilience in 2020Q3, as both consumption expenditure and investment increased during the quarter. Bank staff projects real GDP growth of 7.9 per cent for 2021.
Domestic inflation continues to be subject to supply-side pressures. In the absence of further external shocks, Bank staff is forecasting headline inflation at about 3 per cent for 2021.
Based on these projections, the MPC considers that the current monetary policy stance is appropriate and supportive of economic recovery. Accordingly, the MPC has decided to maintain the KRR at 1.85 per cent per annum.
The MPC will continue to monitor the economic situation closely and stands ready to meet in between its regular meetings, if the need arises.
The MPC will issue the Minutes of its meeting on Thursday 18 February 2021."
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